In 2003, The 78^th Texas Legislature passed legislation which modified the existing Texas Prompt Pay Law. One of the requirements for insured PPOs and HMOs under this law is to pay financial penalties for claims determined as “underpaid” according to contract. This law allowed contracting HMO and PPO providers 180 days from the date of the underpayment to report this to the Payer in question in order to collect the contracted amount as well as any penalties owed according to the calculation guidelines. This law also gave Payers an opportunity to avoid penalty if the provider did not inform them within 180 days and a correction was done to pay the underpaid amount according to contract within 45 days from the date of “late” notice of underpayment from the provider. In 2007 the 80^th Texas Legislature amended the guidelines established in 2003 by enacting legislation which went into effect on September 1, 2007.

This new law extends the time that a contracted HMO or PPO provider has to report an underpayment to HMOs and insurers to claim the contracted amount as well as any Prompt Pay penalties owed. The timeframe has been extended from 180 days to 270 days. This does not change the Blue Cross and Blue Shield of Texas (BCBSTX) Claims Appeal process guidelines still in place but extends the timeframe for reporting underpayments only. 180 days is still the guideline for all other types of claim appeals for BCBSTX. This new law also shortens the time frame for Payers to correct underpaid claims and avoid penalty if providers do not report under payments within the 270-day time frame. Previously insurance companies had 45 days to correct underpayments from the date of “late” notification without penalty. The new legislation allows 30 days.

Additionally the new law modifies the definition of “underpaid amount” in the HMO and PPO statute to clarify that the underpaid amount is calculated on the ratio of the amount underpaid on the contracted rate to the contracted rate as applied to AN AMOUNT EQUAL TO the billed charges as submitted on the claim MINUS THE CONTRACTED RATE (the language in caps is added by this new law).

The new law was signed into law and goes into effect for claims submitted on or after September 1^st, 2007. For additional information regarding the definition change for “underpaid amount” or how to calculate penalties established in this new law relating to the Texas Insurance Code and other provisions relating to the prompt payment of claims please visit:

http://www.capitol.state.tx.us/ or http://www.tdi.state.tx.us/

BCBSTX is actively engaged in reviewing new legislation regarding health care as well as determining the necessary steps required to meet compliance by the effective date of each new law. We are also committed to communicate any changes in our policies and procedures as a result of these new laws to our Member and Provider communities.

updated 2/2008